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Hungary austerity package protest

Several thousand labour union members have staged a protest in Budapest against a government austerity package that they say requires a disproportionate sacrifice from workers.

08 Jul 2006 22:03 GMT

Six national unions organised the protest on Saturday

Six national unions organised the protest on Saturday, two days before parliament was set to approve tax rises that are a key element of the plan of Ferenc Gyurcsany, the Hungarian prime minister, to cut down on a soaring public deficit threatening economic stability.

More than 12,000 public sector employees are expected to lose their jobs as part of the austerity package which Gyurcsany has said will save the state $1.6 billion this year.

Disillusioned unions, several of which supported the socialist prime minister's re-election in April, said the government wants to raise revenue by taking money away from those who have the least. Others protested against mass layoffs.

Tax hikes

Parliament is set on Monday to approve a range of tax increases, including a new 20% tax on interest, the raising of a simplified entrepreneurial tax from 15% to 25%, and a new "solidarity tax" of 4% on profitable companies.

Union leaders also pointed to a rise in value-added taxes, the cut in gas price subsidies, and massive layoffs in the public sector as particularly hurting workers.

The government measures are aimed at cutting the deficit, currently the highest in the European Union at an expected 8% of gross domestic product (GDP) this year, and keeping Hungary on track to adopt the euro as its currency by 2010.

Hungary must reduce its public deficit to below 3% of GDP by 2008, two years before the planned adoption of the euro.